Section 206B | Supplementary charge on refund of overpaid IHT

(1)This section applies where—

(a)a registered pension scheme pays a lump sum death benefit in respect of a deceased member to a non-qualifying person,

(b)a liability to the lump sum death benefits charge arises in respect of the lump sum death benefit,

(c)an amount of inheritance tax that is attributable to the value of notional pension property of the deceased member is paid,

(d)some or all of the inheritance tax paid as mentioned in paragraph (c) is subsequently—

(i)repaid under section 241(1) of that Act to the non-qualifying person, or

(ii)repaid under that section to the deceased’s personal representatives and passed on by the personal representatives to the non-qualifying person, and

(e)in a case in which the payment mentioned in paragraph (c) was made by the non-qualifying person or by the deceased’s personal representatives, the non-qualifying person has made an application under section 206A in relation to the lump sum death benefit.

(2)A charge to income tax arises in respect of the relevant amount.

(3)In subsection (2) “the relevant amount” means—

(a)in a case in which the payment of inheritance tax mentioned in subsection (1)(c) is made by the scheme administrator, the amount of the payment made to the non-qualifying person mentioned in subsection (1)(d)(i) or (ii);

(b)in a case in which the payment of inheritance tax mentioned in subsection (1)(c) is made by the non-qualifying person, or by the deceased’s personal representatives, the lesser of—

(i)the amount of the payment made to the non-qualifying person mentioned in subsection (1)(d)(i) or (ii), and

(ii)the repayment made under section 206A to the non-qualifying person in relation to the lump sum death benefit.

(4)The person liable to the charge is the non-qualifying person.

(5)The rate of the charge is the same as the rate of the special lump sum death benefits charge (see section 206(4)).

(6)In this section—

“inheritance tax” includes interest on inheritance tax;

“non-qualifying person” has the same meaning as in section 206.